Wall Street had a rough week as investors grappled with the likelihood of a slow and bumpy economic recovery. Our Supply Chain and Logistics stock index was down essentially across the board.

n the software group, JDA fell 8.4%, followed by Descartes (down 7.3%) and Ariba (down 7.1%). In the hardware group, both Zebra and Intermec were down for the week, 5.0% and 8.6%, respectively. In the transportation and logistics group, Yellow Roadway tumbled 10.3% and Prologis fell 6.6%.

About six years ago this week, the EPPglobal organization was launched. So, we’re going take that anniversary as a catalyst to look at both the history and the future of RFID.

As many of you know, Radio Frequency Identification (RFID) has been around for decades, and certainly was being deployed in both supply chains and other applications in the 1990s at some reasonable volumes.

But the technology remained mostly a very niche solution. Tags were very expensive, and were often built to carry a lot of data. There were almost no real standards.

In the late 1990s, a few researchers at MIT University had a different vision – simpler, much less expensive tags that served mostly to simply identify products. They would operate, in a sense, (though many don’t like this term) as electronic bar codes, and identify each item uniquely.

Gilmore Says:

"In the consumer packaged goods-to-retail sector, consumer goods manufacturers are almost totally dependent on retailers to make RFID work for them."

In 1999, the MIT Auto-ID Center was born, under the leadership of Kevin Ashton, David Brock and Sanjay Sarma with funding from Procter & Gamble, Gillette, the Uniform Code Council (now GS1), Unilever and eventually others. As the founding sponsors imply, the Auto-ID center vision was largely oriented on the consumer goods-to-retail supply chain. Parameters were developed for this more simple tag, which came to be known as the Electronic Product Code or EPC, with compelling visions for how this would transform the retail supply chain.

Simple pilots were conducted. If I remember right, in 2002, a tagged pallet left a Unilever DC and was received via EPC read at a Walmart DC. Rightly or wrongly, the concept of “the 5-cent tag” was born, and has been a vision – and maybe a bit of a conceptual millstone – ever since.

There was clearly tremendous excitement. In June 2003, Walmart made its first announcement about its planned supplier EPC tagging program, which started something of a frenzy. At a conference in Chicago in October, 2003, the EPCglobal organization, an offshoot of GS1, was born. There, it was announced that the Auto-ID center was basically turning over leadership of its pioneering efforts to this new EPCglobal.

There was a huge crowd at the event, including representatives from virtually every consumer packaged goods company, plus many other manufacturers and retailers.

Digital maven Esther Dyson gave a compelling speech on “the internet of things.” EPCglobal announced a vision that included an “Object Naming Service” (ONS) that would basically be an on-line repository of EPC data, so that participants in the value chain could use web services to view or use data about the manufacture and movement of an item, case or pallet-based on its EPC tag number.

What mostly stuck me from the event was that for the first time, companies had a real vision for knowing where everything was in their supply chains, all the time. This would have profound implications if, and when, it occurred.

So, here we are six years later. While I actually am quite bullish on the future of RFID, I think it would be hard not to say that, to date, EPC has been a disappointment in most respects. Certainly so in comparison with the expectations I think most had in those heady days of 2003.

Here’s where we are at, I believe.

EPC activity in the consumer packaged goods arena, where it all started, is at a virtual standstill. The Walmart program is stalled, and its future uncertain. Among other retailers that were prominent early on, the RFID program at UK’s Tesco, which seemed so promising early on, also appears to be treading water. Only Germany’s Metro Stores group continues marching on, though in fits and starts.

Here’s what the RFID program manager at one of the largest consumer packaged goods companies – one very committed to RFID – told me earlier this year: “I would say we are almost numb to the point of cynicism now.” Consumer packaged goods companies have rapidly downsized their efforts and staffs in this area. RFID, not long ago looked like a great career move – now, most that went that way have, or are looking, to get back into mainstream supply chain or logistics roles.

On the positive side, EPC-based technology is being adopted in a large array of other types of applications, from aircraft manufacturing to an increasing number of distribution center applications, to asset tracking and more.

On the retail side, there is a lot of momentum in the apparel sector. Item-level tagging seems to have a compelling value prop. American Apparel has rolled out a successful program in its vertically integrated supply chain and retail store network. Many other apparel retailers are conducting successful pilots. I think you will see a lot of other actual deployments in this area over the next few years.

Also good news is that EPC technology has advanced substantially since 2003, and the “Gen2” standards and products are more than up to most requirements today. That R&D was driven largely by expectations of a Walmart-fueled bonanza that never happened. Lots of venture capitalists saw their investments in RFID companies disappear in value, but the technology did move strongly forward.

So, what went awry with the original core vision? I asked that question to Tim Zimmerman, an analyst who follows the RFID market for Gartner, and he had some interesting things to say.

“It’s as much a matter of expectation as it is of reality,” he said. “The adoption curve of RFID has actually been faster than bar coding and many other supply chain technologies before it. But the expectations on the pace of adoption were set so high when ECPglobal was launched, it was unlikely they could be reached.”

He also said that the belief that you could leap-frog into broad “open-loop” or cross-;company systems before you had a large base of “closed-loop” or internal RFID systems to build on was unrealistic.

I asked a number of other people this same question, and I learned one thing very quickly: no one will publicly say anything that even modestly implies any criticism of Walmart. I don’t think they are really that sensitive.

So, here’s my quick view. In the consumer packaged goods-to-retail sector, consumer goods manufacturers are almost totally dependent on retailers to make RFID work for them. Walmart led the charge, and virtually every other type of retailer sat back and waited to let Walmart do “the dirty work” of moving the technology along, and getting vendors to add tags.

That program fizzled. Hence, manufacturers and most other retailers are stuck for now.

Second, at a case level, tag costs are still too high to provide a clear cross-company cost justification. (Promotional displays are different.)

That said, EPC is increasingly doing some great things in manufacturing, asset tracking (though other RFID technologies are also used), and increasingly in closed-loop distribution systems – especially for companies that don’t have a real-time, bar code-based WMS system yet in place (more on that soon).

Additionally, I believe something to break through the current logjam is likely to occur over the next couple of years. We need to find a way to get the cost of tags down another ratchet from current prices, and think we will. In the next few years, we will start to see real adoption in consumer goods-to-retail and, within five years, hit an inflection point where at the pallet and case level we do see rapid adoption.

That’s my very concise take and view. Would love to hear your perspective.

What is your reaction to Gilmore’s take on EPC six years after its launch? Has ECP to date been a disappointment, or not? Why? How do you think this will now play out? Let us know your thoughts for the Feedback button below.

We received a handful of responses to our piece on What is Senior Management Support for SCM Projects?That includes our Feedback of the Week from Geoff Walker, General Manager Supply Chain at OneSteel, who says, in part, that a key role of supply chain executives on SCM projects is to connect them to the rest of the enterprise.

You will find that letter and a few more on that topic below.

Feedback of the Week – On Senior Management Support:

The supply chain function, by definition, affects almost all parts of an organization. As supply chain professionals, we work within an organisation making sure that the linkages between one part of a business and another work to maximise customer service, and we even make the linkages happen with organizations outside of our own – collaboration.

However, when a project is developed, we only think about the linkages once removed from the project itself. A WMS implementation, for example, makes the warehouse more efficient and effective - improving customer service, reducing waiting times for our logistics providers, which, in turn, requires better replenishment from our production facilities or our suppliers and so on.

Senior Management support is not required for the project itself, but for the entire effect that the supply chain project will have on an organisation as a whole. Successful supply chain projects are not about the project, they are about understanding the effect - that one change in one part of the chain affects all other parts of the chain – BUT we seldom do that with our projects. They are usually discrete and only seen as successful if they deliver value in themselves.

I like to think of gaining Senior Management support for my supply chain improvements by asking what effect the change will have on them and their processes, and dealing with these as part of the project implementation. Not just the immediate and obvious linkages, but looking all the way through the chain.

Geoff Walker

OneSteel General Manager Supply Chain

More On Senior Management Support:

I consider senior management support to refer to the area impacted by change. So, if the change is just in your area, you are the one that needs to support it. In supply chain, we are almost always dealing outside of our area, so that means choosing between the hard way and the easy way. The hard way is constantly selling and reselling your change to every group impacted. The easy way is going up high enough in the organization to have an executive whose influence spans the areas impacted, but somehow you have to cover the price of admission.

The amount of senior management support required depends upon project risk. I like to use a tool developed by Boston Consulting Group called DICE. If it looks like project risk is low, then you can get by without the support. It's usually not that simple.

Trent Sams

VP Planning Systems

Clarks Companies

I enjoyed your article on what is senior management support, a topic that rarely gets discussed head on. Most articles talk about how to get support, not what does support look like.

Another way to validate senior management support: Does your project have "buzz?" If you hear talk about your project in unlikely places from people not directly impacted, you probably have senior management support. Conversely, if you need to spend a lot of time creating 'buzz' (selling the project benefits), don't expect that you've gotten the support you'll need to see the project through to completion.

Jerry Saltzman

Wyeth

I agree completely with Dan.

What happens is that most projects of SCM are seen as operative instead of strategic.

Here are some tips to involve the senior managers that I have experimented with in my SCM projects in the last year:

1. Identify first the financial advantages of the project;

2. Educate to the top management in the values that SCM generates;

3. Translate operative values to Financial values;

4. Involve the people in sales and marketing from the beginning;

5. See that the people in sales and marketing understand SCM as a competitive advantage for them; and,

6. See that the people in sales and marketing present the project, not the operative area.

Manuel Acero

You said: "Sometimes, we let the thing move forward because we don’t have good reasons against it, but we are not really engaged in its success."

This kind of cavalier response from Sr. Management is irresponsible.

Kevin Hampton

SUPPLY CHAIN TRIVIA

Q.

What is the significance of January, 2005 in the history of EPC?

A.

That was the deadline for the top 100 Walmart suppliers to begin tagging cartons of product sent to three Walmart DCs in Texas.